T he U.S. dollar has been surging in value since the start of the year, pummeling domestic manufacturers hoping to sell goods overseas amid red-hot inflation .

Since the start of March, right before the Federal Reserve started increasing its interest rate targets, the dollar, as measured by the real broad dollar index, has risen by more than 11.2%. The value has increased by nearly 14% since the start of the year.

Meanwhile, inflation is raging across the globe. Many economists are projecting that inflation has likely peaked in the United States, but forecasts are that inflation in the United Kingdom and Europe, largely driven by historic energy price increases, could worsen.

Goldman Sachs recently predicted that headline inflation in the United Kingdom could top out at over 22% and that the country’s gross domestic product could fall by 3.4% should energy costs continue to rise. Eurozone inflation was at 9.1% in the 12 months ending in August.

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Connel Fullenkamp, professor of the practice of economics at Duke University, said that because of rising interest rates in the U.S., the dollar has remained strong — something that has broad implications for business in the U.S. and in Europe.

“You can get a much better return on investments in the U.S. because of the higher interest rates, and so people are draining their financial investments out of Europe and out of the U.K. and transferring them over to the U.S., and that’s really what’s driving the exchange rate to a big extent,” he told the Washington Examiner.

Fullenkamp said the strong dollar being seen now harkens back to a period in the mid-1980s. He added that the surging value of the dollar some four decades ago was “really terrible” for U.S. manufacturing firms.

“The strong dollar is really bad news for our companies that need to sell abroad if they’re manufacturing in the U.S. or having to price their output in dollars,” Fullenkamp said.

Caterpillar, a major domestic producer of construction equipment, has seen its stock fall by more than 8% in the past six months. Shares were down on Tuesday more than 23% from a recent peak in April, a month after the Fed started hiking interest rates.

Fullenkamp said there are a lot of manufacturers and service companies in the U.S. that will find themselves with overpriced products as the dollar continues to remain resilient. While some companies will be able to slash prices and remain competitive, many will not have that luxury and may have to cut jobs.

“The longer that this stays true, the more in danger these jobs are,” he said of the dollar staying strong.

Peter Earle, a research fellow at the American Institute for Economic Research, told the Washington Examiner that problems with inflation and stagnation are slamming Europe worse than in the U.S.

“Europe in general, and the U.K. in particular, has slower rates of growth. So inflation is going to hit them harder and for longer than the U.S. They also have lower productivity,” he said.

He also noted that the U.K. and Europe’s plans to cut out Russian energy products in the coming months could be setting up a situation in which the expectations of rising prices will cause prices to increase prematurely.

“Expectations could be playing a very strong role in what is happening in some of the smaller European countries that don’t have the giant market and don’t have the giant diversity in terms of their international trade that the U.S. has,” he said.

The dollar's strength in the months ahead will hinge in large part on the Fed's plans to raise interest rates. U.S. interest rates have been moving upward aggressively, while European interest rates haven’t been increasing at the same pace. That difference in interest rates is a big factor behind the exchange rates.

Danny Leipziger, professor of practice of international business at George Washington University, told the Washington Examiner that the greenback will be resilient.

Because both the Bank of England and the European Central Bank will be forced to raise rates, he said, "I see the dollar remaining strong." He added that the U.S. is better positioned to weather any downturn, another factor that will prop up the dollar.

Because of the prospect of even higher inflation in Europe, especially that much of it is being driven on the supply side by energy prices, expectations are also tilted toward a recession — a prospect that could bolster the dollar’s strength.

Typically, in a recessionary scenario like the one Europe may be facing, central banks tend to push down interest rates. If the U.S. isn’t suffering to the same degree as Europe economically and domestic interest rates remain elevated, that could widen the gap between interest rates and bolster the strength of the dollar.

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Other factors are also causing the dollar to rise. The dollar is a haven currency, so when geopolitical factors start causing jitters, the greenback can rise. The war in Ukraine and uncertainty about China, both its COVID-19 shutdowns and tensions with Taiwan, have led many investors toward the dollar.

If people continue purchasing dollar-dominated assets like Treasury bonds as a hedge against geopolitical and economic uncertainty, that will keep strengthening the value of the dollar.